Please note: there may be no market commentary next week, depending on the strength of Hurricane Irma. Thank you.
The holiday-shortened week was not a good one for the markets. Through the Friday close, the Dow was lower by 0.9%, the S&P lost 0.6%, and the Nasdaq dropped 1.2%. Bond prices continued to rise and again hit their highest level of the year as yields keep moving lower. Gold had another good week, rising 1.6%. Oil also turned higher, up 0.6% to $47.56 per barrel. The international Brent oil added slightly more than a dollar to close at $53.75.
The holiday-shortened week was not a good one for the markets. Through the Friday close, the Dow was lower by 0.9%, the S&P lost 0.6%, and the Nasdaq dropped 1.2%. Bond prices continued to rise and again hit their highest level of the year as yields keep moving lower. Gold had another good week, rising 1.6%. Oil also turned higher, up 0.6% to $47.56 per barrel. The international Brent oil added slightly more than a dollar to close at $53.75.
Source: Google Finance
A lot of bad news plagued the market this week.
Stocks opened the week fresh off new threats from North Korea as they tested their most powerful bomb yet. The news sent stocks sharply lower on Tuesday.
The latest hurricane heading towards Florida also impacted the market, especially with hurricane Harvey still fresh on investors’ minds.
Although uncertainty remains on the path of Hurricane Irma, the storm is projected to be the costliest in American history – in addition to the costs from Harvey. This will be very costly to insurance companies and their stocks took a hit as a result.
Below is a chart of the insurance sector ETF:
Stocks opened the week fresh off new threats from North Korea as they tested their most powerful bomb yet. The news sent stocks sharply lower on Tuesday.
The latest hurricane heading towards Florida also impacted the market, especially with hurricane Harvey still fresh on investors’ minds.
Although uncertainty remains on the path of Hurricane Irma, the storm is projected to be the costliest in American history – in addition to the costs from Harvey. This will be very costly to insurance companies and their stocks took a hit as a result.
Below is a chart of the insurance sector ETF:
Reinsurance companies were hit even harder, losing as much as 30% this week. Reinsurance is like “insurance for insurance companies.” Insurance companies take out their own insurance to protect them from catastrophic losses. Smaller insurance companies are required by law to have reinsurance, too. These usually aren’t household names, but they are important in the insurance industry.
The storm is also expected to impact economic data. Below is a chart of weekly jobless claims. The number shot higher last week as a result of Harvey, which was similar to what we saw with hurricane Katrina and Sandy. Irma is likely to have a similar impact.
Other economic data this week was fairly positive. The Beige Book is anecdotal evidence collected by the Fed to gauge the strength of the economy and it showed continued “modest to moderate” growth. Productivity in the second quarter was revised higher to 1.5%, which is a marked improvement from the 0.1% in the first quarter.
The strength of the service sector also ticked higher last month. This, combined with the solid manufacturing data released last week, shows a slow and steadily improving economy.
The strength of the service sector also ticked higher last month. This, combined with the solid manufacturing data released last week, shows a slow and steadily improving economy.
Our central bank, the Fed, was in the news this week as several members publicly commented on their concern over low inflation levels. Since the Fed wants to see higher inflation before pulling back on its stimulus, this suggests they will be hesitant to do so. The news pushed bond prices higher as a result. We thought it would also be beneficial to stocks, but it had little impact.
The European Central Bank (or ECB), was also in the news as they held one of their policy meetings. Their economy has been improving and many investors believed this would prompt them to pull back on their stimulus. However, the ECB announced they would make no changes through the end of the year and possibly later.
There’s still a lot of stimulus out there, even 10 years after our financial crisis.
Next Week
All eyes here in the South will be on Hurricane Irma as it meanders up Florida. We’ll also get a few economic reports worth watching, including data on inflation, retail sales, industrial production, and employment.
Investment Strategy
The broader market is not at a level we find attractive for new money at this time (on a short-term basis), but there may still be a little more room to run higher. We are cautious, though, since we are entering a historically volatile part of the year for stocks.
As for our longer term view, our outlook is a little less rosy but still positive. We were hoping to see some pro-business reforms being implemented in Washington – lower taxes, regulations, etc. – but the likelihood of any significant reforms has diminished. The overall business climate is still favorable, which we think will still help the market.
Bond prices are at the high end of their trading range (so yields are on the low end). We believe yields will stay low and prices high for the foreseeable future, but don’t see a lot of upside potential in their prices at this time.
As for the rest of the portfolio, bonds to protect against inflation, or TIPs, remain a good long term hedge for inflation. Floating-rate bonds will do well if interest rates eventually do rise.
Some municipal bonds look attractive for the right client, too. We like buying individual, insured names for these bonds, avoiding muni index bonds if possible. We keep a longer term focus with these investments.
Gold is another good hedge for the portfolio. It is only a hedge at this point – rising on geopolitical issues as a flight to safety.
Finally, in international stocks, we see weakness around the globe and favor neither the developed or emerging markets, though they are looking cheap.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
The European Central Bank (or ECB), was also in the news as they held one of their policy meetings. Their economy has been improving and many investors believed this would prompt them to pull back on their stimulus. However, the ECB announced they would make no changes through the end of the year and possibly later.
There’s still a lot of stimulus out there, even 10 years after our financial crisis.
Next Week
All eyes here in the South will be on Hurricane Irma as it meanders up Florida. We’ll also get a few economic reports worth watching, including data on inflation, retail sales, industrial production, and employment.
Investment Strategy
The broader market is not at a level we find attractive for new money at this time (on a short-term basis), but there may still be a little more room to run higher. We are cautious, though, since we are entering a historically volatile part of the year for stocks.
As for our longer term view, our outlook is a little less rosy but still positive. We were hoping to see some pro-business reforms being implemented in Washington – lower taxes, regulations, etc. – but the likelihood of any significant reforms has diminished. The overall business climate is still favorable, which we think will still help the market.
Bond prices are at the high end of their trading range (so yields are on the low end). We believe yields will stay low and prices high for the foreseeable future, but don’t see a lot of upside potential in their prices at this time.
As for the rest of the portfolio, bonds to protect against inflation, or TIPs, remain a good long term hedge for inflation. Floating-rate bonds will do well if interest rates eventually do rise.
Some municipal bonds look attractive for the right client, too. We like buying individual, insured names for these bonds, avoiding muni index bonds if possible. We keep a longer term focus with these investments.
Gold is another good hedge for the portfolio. It is only a hedge at this point – rising on geopolitical issues as a flight to safety.
Finally, in international stocks, we see weakness around the globe and favor neither the developed or emerging markets, though they are looking cheap.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
